An astounding 70% of companies disclose detailed products and services data at GICS level 5. Unfortunately, the majority of ESG data providers only use levels 3 or 4, leaving investors with an incomplete picture of a company’s true ESG impact.
With today’s tech-driven toolkit, investors have an opportunity to go beyond traditional methods and dig deeper into the details of a company’s products and services.
See the Full Picture
Traditional industry classification systems, such as the Global Industry Classification Standard (GICS), provide a broad overview of a company’s business activities. However, these systems often fall short in providing the level of detail required for a comprehensive ESG analysis.
With 70% of companies disclosing more detailed information about their products and services than what is captured by GICS, investors may be missing out on a wealth of data that could significantly change their understanding of a company’s ESG performance.
To put this into perspective – the deepest level GICS classifies business activities down to is level ‘4’ which equals 163 sub-industries. At Impact Cubed, however, we dive down to the equivalent of a level 7, covering 2,300 sub-sub-sub sectors.
You get the idea.
This innovative approach captures all the additional disclosed detail provided by companies, as well as forming the basis for the best ESG estimations available.
Garbage in, garbage out. How we get better carbon estimations.
Even though most companies disclose their products and services and business activity revenues, they don’t yet disclose on some of the environmental and social considerations of their operations. For example, fewer than 10,000 companies disclose their carbon emissions. What do you do for the other 40,000 listed companies? Standard practice is to estimate carbon emissions based on a peer group of companies with similar business activities.
Getting accurate estimates begins with feeding the right business activities and peer groups into an estimation model. It doesn’t matter how powerful regression models are if the data going in is not granular or precise.
By combining our detailed classification system with regional revenues, we identify the most suitable sector-region peer groups and feed this into our regression model, resulting in more accurate carbon estimations. This granular approach ensures investors have access to the best data, leading to better decision-making.
Differentiating Technology Hardware: A Case Study
Our detailed classification levels allow us to differentiate between specific technologies, such as display panels, that have very different carbon emissions than the broader technology hardware peer group.
As we can see here, investors could be underestimating their GHG emissions by a factor of eight if they classify a display panel company as technology hardware (GICS level 3).
Food Crops: Exploring Environmental and Societal Impact
Our granular approach to classification also provides insight into revenue streams that may be environmentally good and bad, which may not be apparent with more generic classifications.
For example, we can split ‘Food crop production’ to uncover activities like soybean farming and palm oil production which are more likely to have a negative ESG impact.
The Role of Accurate ESG Data in Informed Investment Decisions
We’re revolutionising the ESG data landscape by providing unprecedented granularity and accuracy when it comes to products and services data. By utilising our online analytics platform, institutional investors can gain deeper insights and make more informed decisions that align with their ESG goals.
Frequently Asked Questions (FAQs)
1. What is Impact Cubed’s unique advantage over other ESG data providers?
Impact Cubed offers unparalleled granularity in its business activity classifications, with over 2,300 classifications split into individual geographies. This allows for more accurate estimates of a company’s impact such as carbon, water, and waste emissions compared to other providers.
2. How does Impact Cubed’s detailed classification system benefit investors?
With the detailed classification system, investors can better differentiate between companies based on their specific products and services, leading to more informed investment decisions that align with their ESG goals.
3. How does Impact Cubed’s approach to ESG data contribute to positive change?
By providing accurate and granular data, Impact Cubed empowers investors to make better decisions that promote sustainable and responsible business practices, driving positive change within industries and companies.
For more information, or to see our platform in action for yourself, get in touch below:
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